Post Katrina Business Recovery Essay

CDFIs Stand for community development financial institutions. These ar unique financial institution in that they provide funding to the low-income bracket that is otherwise ignored by the mainstream financial institutions. They are undergroundly possess by the local community and eat an aim to stir profit. However, their emphasis on profit make is subject to get aheads to local community. They provide funds for rebuilding businesses and housing especially in accident micturate areas. CDFIs include community development banks, community development trade unions, community development loans funds small enterprises funds, community development venture funds, and community development corporation-based lenders and positionors (www.cdfiorg,2007) CDFIs are quite useful in dowery tribe who have lost investments in disasters rebuild. teeny businesses that were destroyed by Hurricane Katrina in the Gulf edge could get funding to rebuild from CDFIs. CDFIs form a channel for the disinvested people to make new investments or rebuild their old investments.They can also walk advice and financial know-how to the borrowers and assist them stabilize and repay the loans. Finally, they offer other banking services that the low-income community requires (Mascarenhas, Prianjalo, 2006). CDFIs are most effective because they do not require the tralatitious securities from borrowers and have flexible rules of engagement with clients to help both(prenominal) parties achieve their objectives. The low collateral makes funds advantageously accessible to the community members rebuilding their business from the disaster.The private sector can come in to invest in CDFIs and provide surplus capital. This gives the CDFI greater coverage and flexibility. The CDFIs forget bridge the gap between the un-banked disaster victims and the traditional banking system.Tax credits Tax credits provide a taxpayer a tax nest egg and in effect raise the personal of business income. Tax credits unlike tax subtraction reduce the tax payable rather than the taxable income. The federal or state governments apply them to supercharge a certain investment program and to achieve an overall social goal. They integrate social ken in business investment decisions in the private sector. (Laws, Forrest, 2007). In the Katrina recovery program, tax credits would be useful in encouraging investment the Gulf Coast. The Coast became hostile to investment due to the hurricane persecute and the resultant poverty levels.Such tax credits would also be useful when extended to disinvested people trying to restart their business in that region. They do not have to pay full taxes succession their businesses are struggling to regain profitability. The tax credits can be based on and write off much(prenominal) as wage bill to boost employment and the society achieves a double bottom of the inning line. Such tax credits are also effective when they actually make the disaster-hit area more than appealing to investor over other investment destinations (Seck, Kathyrn 2007). Tax credits may help businesses break compensate stay afloat in a harsh business environment. Tax credits also realise enough cash is available to run operations.Guaranteed loans and bonds They are loans provided by the private sector to borrowers whose businesses were affected or destroyed by a disaster for which the federal or state government provides partial undertake in case of default. These loans sucker small businesses that fit in within a certain criteria provided when such a program is set up. The amount loaned out must also be in bicycle-built-for-two with the number of employees. These loans are effective if the interest rates charged are reasonable to enhance handiness by the borrowers. These loans provide necessary cash to run operations of the businesses (www.doa.louisiana.gov.2006)Business improvement districts This is an beginning(a) taken by business taken by busine ss people and property owners within a inclined urban area to payout extra taxes or fees in return for contract services within that area. The fees are paid to a local authority, which in turns provides the services such services may include additional security, enhanced clean-ups, or public illume. The private sector group involved demands the services that transform the target area in to an attractive destination either for investment or for consumptions.One of the advantages is that BIDs direct private sector enthusiasm to improve on the business environment. They also enable the private sector to make their own priorities in the public services they need. The private sector also directly benefits from the contracts to provide such services. BIDs also ensure constant cash flow contributed by all beneficiaries from which the services are provided. Contributions are mandatory to all. (Stokes, R. 2006) On the other hand BIDs may impose excessive fees that may not be unanimous to all but the majority may push through their figure. BIDs may also benefit the members unevenly in spite of ratio of contribution made. BIDs provide such services as return of disaster urban area. The local business community and property owners allow with local authority to plug in rehabilitate the damage infrastructure. They will also be in involved in lighting up the public areas and provision of social services. The BIDs will also enhance security in the recovery distributor point finally they will regain their market segment through aggressive sales promotion both locally and nationwide.( Mitchell, Jerry, 1999.) BIDs required professional management that is able to evaluate various ideas and provide a domineering way of achieving them. The management should be accountable to all members providing as report of low the funds have been utilized. BIDs on formation should provide a clear appraisal methodology to check on whether the determined down goals are met.Tax investment financial district This is a local authority initiative that involves identifying of a particular area in a city and enhancing private sector investment in that area through channeling of tax increment to fund the initiative. The city issue bonds to raise funds for providing incentives in the specified district. Such incentives could be road network on institution or a ototoxic waste removal. These incentives rebuild the district appeal to investors and the property prices go up. The higher property prices expand the taxable property income and consequently, the property taxes. The authority then channels the tax increment caused by the redevelopment in to a special fund, which bay the bonds. The city sets the boundaries for district and uses the taxable income of the plan as the base.TIFs runs for a specified period after which the tax freeze is lifted and property owners can profit from the redevelopment. (Michael, Joel, 2006) TIFs are advantageous in that they promote investmen t in area where the private sector had shunned and was disinvesting. They ensure balanced harvest-festival through out the city without some parts lagging for behind. Tax revenues are also not diverted from other areas of the city to promote investment in a particular district. However TIFs may lead to displacement of low-income earners by the rich one the district is improved the poor are pushed to poorer areas of the city.( Tyler, Norm, 2007) TIFs will finance such development as restoration public infrastructure, utilities, rehabilitation parks and side walks, lighting up of the districts and provision of parking facilities in the disaster-hit towns of the gulf coast. When these services are provided, the private sector will find the cities to be more appealing to private sector. However, the authorities need to carry out a detailed study in the viability of the program and in setting up the boundaries of the district. Public expenditure should go to project that would stimulate private sector growth raise property prices taxes. (Eathington, Liesl, and David Swenson, 2002)ReferencesSeck, Kathyrn, 2007. Landrieu Introduces Gulf Coast Small Business Recovery Package. US Senate Committee on Small Businesses & Entrepreneurship. Retrieved On 11/30/07 from http//sbc.senate.gov/record.cfm?id=269054 concretion of CDFI, 2007. What are CFDIs? Retrieved On 11/30/07 fromhttp//64.233.169.104/search?q=cacheOraXP0FLmrkJwww.cdfi.org/whatare.asp+CDFI&hl=en&ct=clnk&cd=4&gl=kePrinjali, Mascarenhas, 2006. Groups Investing In Katrina-Torn Gulf Region. Washington DC. Retrieved On 11/30/07 from http//www.socialinvest.org/news/releases/pressrelease.cfm?id=55Laws, Forrest, 2007. Baucus Permanent Disaster Fund, Tax Credits To Ease Budget Crunch. Farm press. Retrieved On 11/30/07 from http//deltafarmpress.com/farmbill/070914-Tax-Package/Louisiana Office of Community Development Disaster Recovery Unit, 2006. Long Term Recovery add Guarantee Program Proposed Guidelines. Retrieved On 11/30/07 from http//www.doa.louisiana.gov/cdbg/dr/ed/Proposed-LTRLP-Guidelines-06_11_27.pdfMitchell, Jerry, 1999. Business Improvement Districts and Innovative bail Delivery. Retrieved On 11/30/07 from http//www.businessofgovernment.org/pdfs/Mitchell.pdfTyler, Norm, 2007. Tax Increment Financing. Downtown Revitalization. . Retrieved On 11/30/07 from http//www.emich.edu/public/geo/557book/d232.tif.htmlEathington, Liesl, and David Swenson, 2002. Do Tax Increment Finance Districts in Iowa Spur Regional Economic and Demographic branch? Department of Economics. Iowa State University. Retrieved On 11/30/07 from http//www.econ.iastate.edu/research/webpapers/paper_4094_N0138.pdfStokes, R. 2006. Business Improvement Districts and Inner metropolis Revitalization The Case Of Philadelphias Frankford Special Services District. International Journal of Public Administration, Volume 29, final result 1 3 January 2006.Michael, Joel, 2006. Tax Increment Financing. Minnesota House of Representativ es. Retrieved On 11/30/07 from http//www.house.leg.state.mn.us/hrd/issinfo/sstif.htm